Productivity in the sheep industry – how it measures up

16 August 2017

Productivity growth is an essential measure of performance for Australian agriculture as, in the long term, it demonstrates the change in efficiency of utilising inputs (such as land, labour, capital, chemicals, fodder) to produce outputs (such as meat, wool, crops, milk). Improving productivity is a key mechanism to maintain producer profitability, and to meet the challenges of factors out of their control, such as seasonal conditions.

In their annual productivity report, ABARES define productivity growth as the increase in an output beyond associated increased input use, and use a measure of total factor productivity (TFP; ratio of gross output to total inputs). While long-term TFP growth is indicative of efficiency in a farm business, short-term measurements of productivity growth are sensitive to weather variability.

ABARES highlight several drivers of agricultural productivity growth. Over the long-term, growth is driven largely by technological progress. Producers have taken on developments in technology and knowledge by utilising pest and disease resistant crops, better planting and harvesting techniques and advancing livestock genetics.

In the short term, variation in TFP growth is largely influenced by seasonal conditions. The high growth of the 1970s-90s can be partially attributed to above average rainfall which influenced increased cropping yields and strong pasture growth. The adverse seasonal conditions of the 1990s and in particular the early 2000s contributed to the slow-down in growth since the 1990s.

The growth in farm size over the past four decades has also been a factor in the recent increase in productivity. Larger farms tend to have higher productivity as they can have greater ability to fund investment and adopt new innovations.

Farm management is another important factor in the productivity of farm businesses – requiring knowledge and skills to maximise profits.

The sheep industry

Productivity growth in the sheep industry averaged 0.3% per year from 1977-78 to 2014-15. Between 2001-02 and 2014-15, there was a larger decline of inputs versus outputs, which saw annual productivity growth average 2.7%, the highest growth for broadacre industries. Over the same period, cropping averaged 2.1% and beef averaged 0.5%.

The removal of the Wool Reserve Price Scheme in 1991 saw many producers make the shift from wool to cropping and sheepmeat enterprises. This, as well as major destocking events during times of drought, has led to a smaller national flock. Advances in animal breeding and genetics, as well as improved management of flocks, disease and fodder have also played a big part in productivity growth in the sheep industry.

Since the early 1990’s, the increase in the proportion of ewes in the flock, and the corresponding decline in the proportion of wethers numbers has seen lamb production rise. A greater focus on selection for meat traits and increased use of non-Merino rams, first cross ewes and meat breeds has seen improved lamb growth rates and a higher incidence of twinning. Furthermore, improved pastures and greater use of fodder crops and supplementary feed has led to better ewe fertility, lower lamb mortality rates, as well as heavier average carcase weights.